An Introduction to Telecom Expense Management: More Complex Than You’d Think

Spend Matters would like to welcome Kevin Dunetz, a 20-year telecom veteran and co-founder of Rivermine (which Emptoris recently acquired). This posting is intended to be an introduction to Telecom Expense Management for those that are perhaps not familiar with the industry.

I was at a trade show a few weeks back, talking to a senior executive from the Procurement department of one of the biggest companies in the world. We were talking about how his company handled telecom procurement, and I asked him "So after you negotiate an amazing deal with your service providers, how do you ensure that you actually get the rates that you negotiated?" His answer kind of surprised me. He said he wasn't quite sure if or how they were validated.

Telecom is certainly a different type of spend category than others. Not only is it one of the largest expenses in a corporation, but it is also one of the most complex expenses. There are hundreds of carriers to deal with, hundreds of different service types that all cost different amounts and get billed in different ways. You can't physically touch telecom service so it is hard to count or reconcile against an order request. The Telecom Expense Management (TEM) industry came into existence to make it possible (or at least easier) to validate that what you negotiated or purchased from a Service Provider is in fact being billed accurately.

At the most basic level, TEM is the process of reading all the telecom invoices, validating the tariff and contractual rates are being billed properly, and allocating the charges out to the organization that incurred those charges. TEM is used to validate mobile, voice, and data expenses. A TEM solution is typically delivered as a managed service by a third party; however, there are a few companies that sell an on-premise software solution. The invoices are sent directly from the carrier to the TEM provider, and the TEM provider will provide an interface file back with the invoice payment and allocation information. You will also get a wealth of reporting information from your TEM solution -- everything from detailed Spend Analysis to valuable budgeting and forecasting data will be at your fingertips at a moment's notice. For those unfamiliar with the industry, Gartner puts out several reports outlining the top TEM vendors.

Organizations that deploy TEM have been known to save between 7-40% on their telecom invoices. The actual number depends on how clean the telecom invoices are to start as well as what types of services are being procured. One of the top savings categories is contractual errors. I never worked for a phone company myself, but somehow (most likely by accident), the rates that you negotiate never get put into the billing system properly thus producing an erroneous invoice. The TEM solution will catch this automatically for you by storing your contractual rates and comparing them to the first invoice on the new contract. Another way a TEM solution can help is by identifying services that are no longer being used. A large financial company was paying $10K per month for a service at the World Trade Center in New York City in the year 2005. The TEM solution was able to highlight this very costly service so the company could notify the carrier to stop billing.

If you work in a procurement organization and your company doesn't have a TEM solution, you should absolutely be looking to get one in place. It will better guarantee that all your hard work negotiating great rates with phone companies actually hit your company's bottom line.

Spend Matters would like to thank Kevin for his contribution.

-- Kevin Dunetz, Global and Emerging Markets TEM Expert, Emptoris

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